return on investment

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return on investment

An executive presents a chart showing a strong return on investment to the board.

Definition
  1. Noun:
    • A financial performance measure: Return on investment (ROI) is a ratio used to evaluate the efficiency or profitability of an investment. It calculates the amount of return on an investment relative to its cost.
    • A key metric in corporate finance: It is expressed as a percentage and is calculated by dividing the net gain from an investment by the initial cost of the investment.
Usage Examples
  • Noun:
    • The marketing campaign had a high return on investment, generating twice the revenue it cost.
    • Investors always analyze the potential return on investment before funding a new startup.
    • A good return on investment is crucial for the project to receive continued funding.
Advanced Usage
  • "to calculate the return on investment": to compute the profitability ratio.
    • We need to calculate the return on investment for the last quarter to present to the board.
  • "ROI analysis": the process of evaluating the profitability of different investments.
    • The ROI analysis showed that upgrading our software would be more beneficial than hiring more staff.
Variants and Related Words
  • ROI (n): A common abbreviation for "return on investment."
    • The ROI for that asset was over 15%.
  • Rate of return (n): A similar concept measuring the gain or loss on an investment over a specified period.
    • The annual rate of return on the bond was 5%.
Synonyms
  • Profitability ratio: A financial metric used to assess a business's ability to generate earnings relative to its expenses.
  • Gain on investment: The profit earned from an investment.
Related Phrases
  • "to yield a high return on investment": to produce a large profit relative to the cost.
    • The new factory is expected to yield a high return on investment within three years.
  • "to justify the return on investment": to provide a reason for the profitability that makes an investment worthwhile.
    • The time savings must justify the return on investment for this expensive equipment.
return on investment

An executive presents a chart showing a strong return on investment to the board.

Noun
  1. (corporate finance) the amount, expressed as a percentage, that is earned on a company's total capital calculated by dividing the total capital into earnings before interest, taxes, or dividends are paid

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